Universal Credit Could 'Backfire' On Poor People, Think-Tank Warns

The government's flagship reforms to benefit payments could backfire and push more poor people into debt, a leading think-tank has warned.

Work and pensions secretary Iain Duncan Smith is set on merging separate existing benefits into one single monthly payment called the Universal Credit with the aim of incentivising people to work.

But today's report from the Social Market Foundation (SMF) will add to unease within government about the viability of the scheme, which is said to also face opposition from the country's top civil servant as well as the Labour Party.

Under the Universal Credit there will be one single monthly benefit payment - rather than weekly or fortnightly as at present.

Writing on The Huffington Post UK today, Ryan Shorthouse, from the SMF, said the proposed system could leave people without any income for over a month.

"The scheme aims to prepare families for work, and boost their resilience to financial shocks," he says.

"But the SMF research, which looks for the first time at how low-income families themselves will respond to the changes, worryingly reveals that these laudable aims are at risk of backfiring and pushing more people into debt."

He adds: "The move to a fixed monthly benefits assessment also looks likely to risk pushing people into debt. Our analysis found that people who lose their jobs could go for over a month with no income at all under the move to fixed monthly assessments."

"Even if the Universal Credit does get off the ground, it currently leaves claimants to either sink or swim."

In the report published on Monday the SMF called for the introduction of an online budgeting tool allowing claimants to set the frequency of payments themselves and allocate income to different items of expenditure.

Duncan Smith is due to be quizzed by a committee of MPs on Monday afternoon where he will be forced to fight back against mounting criticism.

The former Tory leader was reported to have rebuffed David Cameron's attempt to move him out of the department as part of his recent Cabinet reshuffle amid concerns he would strenuously resist attempts by the Treasury to make further cuts to benefit payments.

Labour's shadow work and pensions secretary Liam Byrne said while fine in theory, the Universal Credit was about to "seriously backfire in practice".

"Iain Duncan Smith now needs to draw a line under the chaos and give us clarity about how this is going to work for squeezed middle families that are set to lose thousands of pounds when Universal credit goes live," he said.

“And we need to know how he's going to get this late, over-budget and multi-billion project back on track. This is not the simple welfare revolution we were promised.

“Ministers must now come clean and publish the business case, the blueprints for universal credit that they have been trying to hide, so we can finally get to the heart of this problem and try to fix it – before it’s too late.”